FCC Clears Frontier Reorg as Carrier Bears Down on Remaining State OKs

The FCC cleared Frontier Communications’ bankruptcy reorganization Thursday with conditions. Frontier Communications promised fiber to states that waited to clear the bankrupt carrier's reorganization. Connecticut’s Public Utilities Regulatory Authority (PURA) proposed conditional OK Tuesday. Frontier offered voluntary commitments to Pennsylvania commissioners last week and reached settlements last month in California and West Virginia. Decisions are expected in the coming weeks before April.

“The transaction serves the public interest, convenience, and necessity and meets the requirements of the Act,” the FCC Wireline Bureau ruled Thursday. It granted a conditional waiver related to the Rural Digital Opportunity Fund (RDOF) Auction 904 long-form application so Frontier can complete the deal before support is authorized and not default on auction obligations. “The public interest would not be served by prohibiting the foreign ownership that would be held in the Operating Subsidiaries’ proposed controlling U.S. parent, Frontier Intermediate, upon emergence from Chapter 11 bankruptcy, or by strictly applying the prohibition on major changes to a Rural Digital Opportunity Fund long-form application in these particular circumstances."

Frontier still needs OK from state commissions in California, Connecticut, Pennsylvania and West Virginia. A bankruptcy court cleared the Chapter 11 plan Aug. 27, and the carrier got state approvals from Arizona, Georgia, Illinois, Minnesota, Mississippi, Nebraska, Nevada, New York, South Carolina, Texas, Utah and Virginia.

Frontier is reviewing PURA’s draft and looks forward to final OK at the commission’s Feb. 3 meeting, a Frontier spokesperson emailed prior to FCC approval. “We continue working collaboratively toward timely approvals in" the other three states "so we can successfully complete our restructuring and move forward to continue delivering services and creating benefits for our customers.”

Frontier has “the requisite technological, managerial, and financial suitability and responsibility to operate a public service company and provide safe, adequate, and reliable service to the public,” and restructuring will “minimize job losses,” the PURA draft said. Written exceptions are due Wednesday, with oral argument a week later, said a notice attached to Tuesday’s draft decision in docket 20-04-31.

Frontier would have to expand fiber to at least 100,000 more locations in Connecticut by 2025, said the PURA draft. Another condition would require Frontier to avoid job cuts and keep its corporate headquarters in Connecticut for two years. PURA would require Frontier to survey Connecticut customers by March 1, 2022, continue participating in the federal Lifeline program until PURA allows it to stop, and keep negotiating “in good faith” with electric distribution companies (EDCs) on “mutually agreed upon terms for the transfer of ownership interest in jointly owned utility poles to the EDCs,” the draft said.

Frontier seeks West Virginia’s OK by Tuesday, which the carrier says is the expiration date for a Dec. 18 settlement with West Virginia Public Service Commission staff, the agency’s Consumer Advocate Division and Communications Workers of America (CWA). Under the pact, Frontier pledged to deploy fiber to at least 150,000 locations by 2028, including 75,000 in three years, and spend at least $200 million by 2024. It also made reporting promises on jobs and service quality.

Frontier urged the Pennsylvania Public Utility Commission to say yes by Jan. 22 to reap voluntary commitments offered Thursday, but the PUC didn’t weigh the item at its Thursday meeting, and commissioners next meet Feb. 4. “The matter is still being reviewed,” a PUC spokesperson said Thursday. The carrier pledged in docket A-2020-3020004 to spend $50 million over four years on service quality, maintenance and upgrades and to deploy fiber to at least 15,000 locations by 2028. That includes places where Frontier got RDOF support. Frontier promised to, within 90 days, review areas with many consumer complaints and advise the agency about planned actions to improve service quality.

California Public Utilities Commission review might extend into March. Comments are due Wednesday and replies Jan. 27 on Frontier’s Dec. 24 settlement with the CPUC’s Public Advocates Office, The Utility Reform Network (TURN) and CWA, Administrative Law Judge Peter Wercinski ruled Jan. 5. The CPUC would then have to issue a proposed decision about a month before commissioners could vote. Commissioners are scheduled to meet March 4 and 18.

The California agreement “is quite comprehensive and has Frontier making many commitments to ensure that the business direction the company goes in after restructuring will not leave some of its less-served areas totally behind,” emailed TURN Managing Director-San Diego Christine Mailloux. Under the pact, Frontier agreed to spend $1.75 billion over four years to maintain and enhance its network, including at least $22 million for service quality projects to meet CPUC standards. Frontier agreed to increase technician staffing, provide customer credits and subject itself to higher penalties if it fails to meet standards. Frontier pledged fiber deployment to at least 350,000 locations over six years, including 150,000 in areas where Frontier estimates an internal rate of return of less than 20%.

Fiber to 350,000 locations “sounds like a lot, but given Frontier's shift over the past year away from DSL upgrades and towards [fiber], it's probably not out of the comfort zone,” said Tellus Venture Associates President Steve Blum. “Judging by the T-Mobile/Sprint decision, the CPUC seems to have a considerable appetite for imposing conditions that are significantly tougher than the settlement agreements,” and the agency’s extended review of that wireless deal showed “the CPUC runs on its own schedule,” Blum said.

Flagging Frontier commitments to other states, the Minnesota Commerce Department and unions asked the Minnesota PUC to reconsider its September OK (see 2101070027). “We will likely hear this at a mid-February agenda meeting,” since state law requires the commission to act by the end of that month, said a PUC spokesperson.

CWA local leadership is “evaluating whether to file exceptions to the draft decision in Connecticut,” said Hooman Hedayati, strategic research associate-telecom policy. CWA urged Pennsylvania conditions (see 2101050029) and is reviewing the company’s proposed commitments, he said. The union updated the Ohio PUC Dec. 18 about other state reviews and wants the commission to “review Frontier's ‘virtual separation’ plan in this proceeding or under a new proceeding,” Hedayati said. Ohio commissioners aren’t required to act on telco bankruptcy notifications under state rules, noted an agency spokesperson.